Slovenia’s Economy Contracted Further on Austerity, Survey Shows

Slovenia’s economy probably shrank again in the fourth quarter as exports to Europe eased and consumption slumped because of the government’s austerity drive.

Gross domestic product contracted 3.5 percent from the same period in the previous year after a 3.3 percent drop in the July-September period, according to a Bloomberg survey of seven economists. GDP shrank 2.5 percent in 2012, the survey shows. The statistics office will publish the data at tomorrow at 10:30 a.m. in the capital Ljubljana.

“The economy will be dragged lower by most components of GDP, including government and private consumption, as well as investment,” Abbas Ameli-Renani, an economist at Royal Bank of Scotland Group Plc in London, said by e-mail. The only boost will come from goods shipped abroad, though “a contraction in exports for the first time since 2009 should not come as a surprise given the absence of a bounce-back in Slovenia’s main trading partners.”

Slovenia’s government is crumbling as the country is trying to avert a bailout and emerge from a recession. Lawmakers are to vote today on replacing Prime Minister Janez Jansa, who is embroiled in a corruption scandal. His loss of political support puts him at risk of joining leaders across Europe who were toppled by the waves of the economic crisis that started more than four years ago.

Crisis Impact

The Alpine nation’s economy will shrink the most in the European Union after Greece and Cyprus this year on weakening investment, a rising jobless rate and faltering domestic consumption, the European Commission said in a Feb. 22 report. GDP will decline 2 percent this year after an estimated 2 percent contraction last year, the EU’s executive arm said.

Jansa’s minority government which sought to overhaul the economy, including with the formation of a “bad bank” that is meant to clean up balance sheets of lenders such as Nova Ljubljanska Banka d.d. The bank recapitalization plan, worth as much as 5 billion euros ($6.5 billion), may be derailed by a caretaker government that will proposed by Alenka Bratusek, the leader of the largest opposition party , if Jansa is ousted.

“While I believe Slovenia’s growth prospects are positive in the medium-term, the ongoing banking-sector woes will mean the country will suffer the greatest economic contraction in 2013 amongst central and eastern European countries and will not participate in any regional bounce-back,” Ameli-Renani said.

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